Correlation Between Touchstone Premium and Japan 2x

Can any of the company-specific risk be diversified away by investing in both Touchstone Premium and Japan 2x at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Touchstone Premium and Japan 2x into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Touchstone Premium Yield and Japan 2x Strategy, you can compare the effects of market volatilities on Touchstone Premium and Japan 2x and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Touchstone Premium with a short position of Japan 2x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Premium and Japan 2x.

Diversification Opportunities for Touchstone Premium and Japan 2x

0.86

Correlation Coefficient

Touchstone Premium  Japan 2x

Very poor diversification

The 3 months correlation between Touchstone and Japan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Premium Yield and Japan 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan 2x Strategy and Touchstone Premium is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Touchstone Premium Yield are associated (or correlated) with Japan 2x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan 2x Strategy has no effect on the direction of Touchstone Premium i.e., Touchstone Premium and Japan 2x go up and down completely randomly.

Pair Corralation between Touchstone Premium and Japan 2x

Assuming the 90 days horizon Touchstone Premium Yield is expected to generate 0.5 times more return on investment than Japan 2x. However, Touchstone Premium Yield is 2.02 times less risky than Japan 2x. It trades about -0.1 of its potential returns per unit of risk. Japan 2x Strategy is currently generating about -0.11 per unit of risk. If you would invest  856.00  in Touchstone Premium Yield on February 7, 2024 and sell it today you would lose (24.00) from holding Touchstone Premium Yield or give up 2.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Touchstone Premium Yield  vs.  Japan 2x Strategy

Touchstone Premium Yield

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Premium Yield are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Touchstone Premium is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Japan 2x Strategy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Japan 2x Strategy are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Japan 2x is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Touchstone Premium and Japan 2x

The main advantage of trading using opposite Touchstone Premium and Japan 2x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Premium position performs unexpectedly, Japan 2x can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Japan 2x will offset losses from the drop in Japan 2x's long position.

The idea behind Touchstone Premium Yield and Japan 2x Strategy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.